- Selecting the right security
- Knowing when to buy
- Deciding when to sell
When the volatility of the markets are high, and market noise become more prevalent, knowing when to enter and exit an investment becomes critical.
Traditionally Fundamental Analysis of a security’s underlying financials would allow investors to identify “undervalued” stocks and consequently provide the investors with decent returns in the long-run. Eventually analysis of the emotional effect of the markets was developed, creating Technical Analysis systems. Today, the simpler methods of yesterday are no longer enough to generate consistent returns on investments. The extraneous market movement prevalent over the last decade or so, that has little to do with the overall quality of the security. Simply selecting the correct securities is no longer enough. Investors are constantly needing more at their fingertips to create their own, unique analysis of a security.
One can address the problems of when to enter and exit one of four ways:
- Buy off-the-shelf software which have limited functionality and no extensibility
- Buy specialized databases with limited tooling and hard-to-use interfaces
- Develop an expensive custom in-house solution and maintain an ongoing development team for it.
- Trade with eyes wide shut
How does Equities Lab work?
Equities Lab uses a sophisticated UI to help the user enumerate a strategy search space from which an
ideal entry/exit tactic can be selected. It gives the user feedback instantly – not in minutes. This keeps
the dialogue intense, and ensures the UI is immersive. Advances in UI technology mean that much more
complexity can be handled by a skilled user, given the right displays and tooling. Tactics are adapted
and customized for each given security, as each security is like each trader – unique!
The stock market being the adaptive ecosystem it is, these custom tactics will work for a while, on
certain securities, and then stop working as everyone else catches on. Equities Lab monitors the
strategies used to ensure they still work as intended (think Dogs of the Dow, or trading on P/S), and
makes it simple to find the next set of strategies that will outperform before the current set fail
completely. The in memory, column based data store gives the Stock Eyes the speed it needs, while an
incredibly powerful query/search language gives it the nimbleness it needs to be of use to traders.
Starting with our customized strategy creation interface, a user can guide the strategy while specifying that some elements should be optimized. This is then run past huge amounts of data very quickly to determine the optimal values for the strategy. Then the user is given simple alerts and rules to follow in the market that were effective throughout the past. Lastly, the portfolio is managed so the user can see how well his strategy is working as he goes into the future.
Equities Lab is intended for the scientific investor – one who is not afraid of complexity if the complexity can generate superior returns. Many investments today are driven by tradition and superstition, rather than cold, hard facts. Equities Lab can help you cut through the emotional fog to see and exploit the market patterns. It is designed for those who want to submit their ideas to brutal testing before risking it in the market, and those who want to see what is actually going on. Equities Lab requires an investment of time to learn to use, because in order to access the power you need, the system cannot be simple. However it is straightforward and as intuitive as possible, to reduce the learning curve as much as possible.
Equities Lab is a very focused tool: it allows one to pick a security (choose wisely), and define a selection of possible tactics to determine entry and exit points. It will then apply those strategies to that security, and highlight the best one (or the worst one, if that’s what desired). This will enable one to find the perfect tactic for a given security, and add that to a portfolio. The portfolio will then model execution of the selected tactics, and emit messages to enter or exit various securities, making it simple to put winning tactics into practice. Tactics can also be given criteria which will allow them to alert the user when they don’t work as well as they used to. This allows your portfolio to adapt to the market, rather than being a repository of stale tactics.